Legal Definitions - lost-volume seller

A lost-volume seller is a business that sells goods and has such a large inventory or production capacity that if one buyer breaches (breaks) a contract, the seller could have made *both* the original sale to the breaching buyer *and* a subsequent sale of identical goods to a different buyer. In essence, the seller has lost the profit from one entire sale because of the breach, even if they manage to sell the specific item to someone else.

This concept is important because it affects how damages are calculated. Instead of simply receiving the difference between the original contract price and the price they got from reselling the goods (or the market price), a lost-volume seller is entitled to recover the profit they would have made on the *original* sale. This is because, had the first buyer not breached, the seller would have made two sales and two profits, not just one.

Here are some examples to illustrate this concept:

• Car Dealership: Imagine a large car dealership that has several identical models of a popular SUV in stock. A customer, Sarah, signs a contract to buy one of these SUVs but then changes her mind and breaches the agreement. The dealership then sells that exact SUV (or another identical one from its inventory) to another customer, David, a few days later.

  How it illustrates the term: The dealership is a lost-volume seller because it had multiple identical SUVs available. If Sarah had honored her contract, the dealership would have sold an SUV to Sarah *and* another identical SUV to David. By Sarah's breach, the dealership lost the profit from one entire sale, not just the difference between Sarah's contract price and David's purchase price. The dealership would seek to recover the profit it would have made on Sarah's sale.

• Custom Furniture Manufacturer: A workshop specializes in crafting bespoke dining tables. A restaurant owner, Mr. Chen, commissions a unique, large dining table for his new establishment. After the table is nearly complete, Mr. Chen experiences financial difficulties and cancels his order, breaching the contract. The workshop, known for its quality, quickly finds another restaurant, owned by Ms. Rodriguez, that is interested in purchasing an identical table, and sells it to her.

  How it illustrates the term: The furniture workshop is a lost-volume seller because it has the capacity and demand to produce multiple custom tables. If Mr. Chen had not breached, the workshop would have built and sold a table to Mr. Chen *and* another identical table to Ms. Rodriguez. Mr. Chen's breach caused the workshop to lose the profit from one complete table sale, even though they found another buyer for the specific item. The workshop would be entitled to the profit it lost from Mr. Chen's original order.

• Software License Provider: A company develops and sells annual licenses for its project management software. A large corporation, "Tech Solutions Inc.," agrees to purchase 1,000 licenses for its employees but then backs out of the deal due to an internal restructuring. The software company, which can issue an unlimited number of licenses, then sells 1,000 licenses to another growing firm, "Innovate Corp."

  How it illustrates the term: The software company is a lost-volume seller. Since software licenses are not physical goods with limited supply, the company could have easily sold 1,000 licenses to Tech Solutions Inc. *and* another 1,000 licenses to Innovate Corp. Tech Solutions Inc.'s breach resulted in the software company losing the entire profit it would have made from that original sale, even though it subsequently sold the same quantity of licenses to Innovate Corp. The software company would claim the lost profit from the Tech Solutions Inc. contract.